Fremont, Calif. - October 29, 2018- Electronics For Imaging, Inc. (Nasdaq: EFII), a world leader in customer-focused digital printing innovation, today announced its results for the third quarter of 2018.

For the three months ended September 30, 2018, the Company reported record third quarter revenue of $257.1 million, up4% compared to third quarter 2017 revenue of $248.4 million. GAAP net income was $1.9 million compared to GAAP net income of $3.5 million for the same period in 2017 or $0.04 per diluted share compared to $0.07 per diluted share for the same period in 2017. Non-GAAP net income was $22.6 million, down11% compared to non-GAAP net income of $25.4 million for the same period in 2017 or $0.50 per diluted share, down7% compared to $0.54 per diluted share for the same period in 2017. Cash flow from operating activities was $12.9 million compared to $3.4 million during the same period in 2017.

For the nine months ended September 30, 2018, the Company reported revenue of $758.1 million, up5% year-over-year compared to $724.1 million for the same period in 2017. GAAP net income was $2.1 million or $0.05 per diluted share, compared to $11.0 million or $0.23 per diluted share for the same period in 2017. Non-GAAP net income was $62.4 million or $1.38 per diluted share, compared to non-GAAP net income of $76.7 million or $1.63 per diluted share for the same period in 2017. Cash flow from operating activities for the nine months ended September 30, 2018 was $50.2 million compared to $42.4 million during the same period in 2017.

“EFI’s reputation for developing innovative, industry-leading technology was a key factor in my decision to join the Company,” said Bill Muir, CEO of EFI. “The Nozomi platform and its early success in transforming corrugated packaging from analog to digital is just one example of how EFI is accelerating the digital transformation of industries where colorful images matter. I am excited to partner with the talented and passionate team at EFI to fully realize the significant opportunities in front of us and provide increasing value to our customers and shareholders.”

Conference Call

EFI will discuss the Company’s financial results by conference call at 5:00 pm ET/2:00 pm PT today. Instructions for listening to the conference call over the Web are available on the Investor Relations portion of EFI’s website at www.efi.com.

About EFI

EFI™ is a global technology company, based in Silicon Valley, and is leading the worldwide transformation from analog to digital imaging. We are passionate about fueling customer success with products that increase competitiveness and boost productivity. To do that, we develop breakthrough technologies for the manufacturing of signage, packaging, textiles, ceramic tiles, and personalized documents, with a wide range of printers, inks, digital front ends, and a comprehensive business and production workflow suite that transforms and streamlines the entire production process. (www.efi.com)

1

Safe Harbor for Forward Looking Statements

Certain statements in this press release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements other than statements of historical fact including words such as “accelerate”. “address”, “ahead”, “anticipate”, “believe”, “consider”, “continue”, “develop”, “estimate”, “expect”, “further”, "intend", “look”, “plan”, “progress” and "will" and statements in the future tense are forward looking statements. The statements in this press release that could be deemed forward-looking statements include statements regarding EFI’s strategy, plans, expectations regarding its revenue growth, introduction of new products, product portfolio, productivity, future opportunities for EFI and its customers, demand for products, the CEO transition, and any statements or assumptions underlying any of the foregoing.

Forward-looking statements are subject to certain risks and uncertainties that could cause our actual future results to differ materially, or cause a material adverse impact on our results. Potential risks and uncertainties include, but are not necessarily limited to, intense competition in each of our businesses, including competition from products developed by EFI’s customers; our ability to remediate the material weaknesses identified in EFI’s internal control over financial reporting; the uncertainty of the outcome of the pending securities lawsuits against EFI; unforeseen expenses; fluctuations in currency exchange rates; the difficulty of aligning expense levels with revenue; management’s ability to forecast revenues, expenses and earnings; our ability to successfully integrate acquired businesses; changes in the mix of products sold; the uncertainty of market acceptance of new product introductions; challenge of managing asset levels, including inventory and variations in inventory levels; the uncertainty of continued success in technological advances; the challenges of obtaining timely, efficient and quality product manufacturing and supply of components; any world-wide financial and economic difficulties and downturns; adverse tax-related matters such as tax audits, changes in our effective tax rate or new tax legislative proposals; the unpredictability of development schedules and commercialization of products by the leading printer manufacturers and declines or delays in demand for our related products; the impact of changing consumer preferences on demand for our textile products; litigation involving intellectual property rights or other related matters; the uncertainty regarding the amount and timing of future share repurchases by EFI and the origin of funds used for such repurchases; the market prices of EFI's common stock prior to, during and after the share repurchases; and any other risk factors that may be included from time to time in the Company’s SEC reports.

The statements in this press release are made as of the date of this press release and are subject to revision until the Company will have filed its Quarterly Report on Form 10-Q for the period ended September 30, 2018. EFI undertakes no obligation to update information contained in this press release. Amounts are subject to rounding.

For further information regarding risks and uncertainties associated with EFI’s businesses, please refer to the section entitled “Risk Factors” in the Company’s SEC filings, including, but not limited to, its annual report on Form 10-K and its quarterly reports on Form 10-Q, copies of which may be obtained by contacting EFI’s Investor Relations Department by phone at 650-357-3828 or by email at investor.relations@efi.com or EFI’s Investor Relations website at www.efi.com.

Impact of the Tax Cuts and Jobs Act of 2017

On December 22, 2017, the Tax Cuts and Jobs Act, which has wide-ranging impacts on EFI including, but not limited to, a Deemed Repatriation Transition Tax and the revaluation of current U.S. deferred tax assets and liabilities, was enacted. We recorded a $27.3 million charge in the fourth quarter of 2017 as a provisional estimate related to the aforementioned items. In the first quarter of 2018, we also recorded an additional $1.2 million charge related to the state tax impact associated with the Deemed Repatriation Transition Tax. In the third quarter of 2018, we recorded a benefit of $0.7 million, consisting of an additional U.S. tax charge of $0.4 million and a reduction of the anticipated state tax charge of $1.1 million. The SEC staff issued Staff Accounting Bulletin (“SAB”) 118, which allows companies to record a provisional estimate of the income tax effects in the quarter in which it can make reasonable estimates of the effects of the new law. While we have calculated a reasonable estimate of the impact of the U.S. tax rate reduction and the amount of the Deemed Repatriation Transition Tax, we are still gathering additional information to refine and finalize our calculation of the impacts of the new tax law on our U.S. deferred tax assets and liabilities, the Deemed Repatriation Transition Tax, and other provisions associated with the Tax Cuts and Jobs Act. As we obtain additional information, we may record material adjustments in the fourth quarter of 2018, and will finalize the income tax effects in the fourth quarter of 2018 when our analysis is complete.

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we use non-GAAP measures of net income, operating income, and earnings per diluted share that are GAAP net income, GAAP operating income, and GAAP earnings per diluted share adjusted to exclude certain costs, expenses, and gains. A reconciliation of the adjustments to GAAP results for the three and six months ended June 30, 2018 and 2017 is provided below. In addition, an explanation of how management uses non-GAAP financial information to evaluate its business, the substance behind management's decision to use this non-GAAP financial information, the material limitations associated with the use of non-GAAP financial information, the manner in which management compensates for those limitations, and the substantive reasons management believes that this non-GAAP financial information provides useful information to investors is included under "About our Non-GAAP Net Income and Adjustments" after the tables below.

Our non-GAAP measures, including ex-currency are not in accordance with or an alternative to GAAP and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures, used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, revenue, gross profit, operating expenses, net income or earnings per diluted share prepared in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. We expect to continue to incur expenses of a nature similar to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP net income and non-GAAP earnings per diluted share should not be construed as an inference that these costs are unusual, infrequent, or non-recurring.

2

Electronics For Imaging, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

Three Months EndedSeptember 30,

Nine Months Ended September 30,

2018

2017

2018

2017

Revenue

$

257,134

$

248,359

$

758,072

$

724,097

Cost of revenue

131,615

120,902

384,858

345,858

Gross profit

125,519

127,457

373,214

378,239

Operating expenses:

Research and development

40,341

39,585

119,701

118,201

Sales and marketing

44,661

42,269

137,448

129,018

General and administrative

24,466

25,075

57,093

67,239

Amortization of identified intangibles

11,137

12,299

34,801

34,829

Restructuring and other

2,799

832

10,477

5,421

Total operating expenses

123,404

120,060

359,520

354,708

Income from operations

2,115

7,397

13,694

23,531

Interest expense

(4,796

)

(4,912

)

(14,739

)

(14,538

)

Interest income and other income, net

336

1,760

1,270

2,802

Income (loss) before income taxes

(2,345

)

4,245

225

11,795

Benefit from (Provision for) income taxes

4,265

(791

)

1,868

(795

)

Net income

$

1,920

$

3,454

$

2,093

$

11,000

Diluted Earnings Per Share

Net income per diluted common share

$

0.04

$

0.07

$

0.05

$

0.23

Shares used in diluted per-share calculation

45,354

46,937

45,388

47,102

3

Electronics For Imaging, Inc.

Reconciliation of GAAP Net Income to Non-GAAP Net Income

(in thousands, except per share data)

(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2018

2017

Ex-Currency

2018

2018

2017

Ex-Currency

2018

Net income

$

1,920

$

3,454

$

1,920

$

2,093

$

11,000

$

2,093

Cost of revenue related to fair value inventory adjustments

7

77

7

31

1,260

31

Ex-currency adjustment

—

—

1,189

—

—

576

Amortization of intangibles assets

11,137

12,299

11,137

34,801

34,829

34,801

Stock based compensation – Cost of revenue

904

486

904

2,715

1,985

2,715

Stock based compensation – Research and development

3,649

1,640

3,649

9,517

7,556

9,517

Stock based compensation – Sales and marketing

2,377

1,108

2,377

6,767

5,176

6,767

Stock based compensation – General and administrative

4,993

1,414

4,993

11,479

7,824

11,479

Restructuring and other

2,799

833

2,799

10,477

5,422

10,477

General and administrative:

Acquisition-related transaction costs

164

637

164

931

1,820

931

Changes in fair value of contingent consideration

812

410

812

(11,860

)

2,187

(11,860

)

Revenue recognition accounting review costs and litigation and other settlements

(88

)

4,825

(88

)

1,671

5,102

1,671

Interest income and other income (expense), net:

Non-cash interest expense related to our convertible notes

3,477

3,293

3,477

10,289

9,713

10,289

Foreign exchange fluctuation related to contingent consideration

8

131

8

8

45

8

Balance sheet currency remeasurement impact

—

—

(672

)

—

—

(1,644

)

Tax effect of non-GAAP adjustments

(9,565

)

(5,175

)

(9,664

)

(16,508

)

(17,201

)

(16,305

)

Non-GAAP net income

$

22,594

$

25,432

$

23,012

$

62,411

$

76,718

$

61,546

Non-GAAP net income per diluted common share

$

0.50

$

0.54

$

0.51

$

1.38

$

1.63

$

1.36

Shares used in diluted per share calculation

45,354

46,937

45,354

45,388

47,102

45,388

4

Electronics For Imaging, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

September 30, 2018

December 31, 2017

Assets

Current assets:

Cash and cash equivalents

$

180,942

$

170,345

Short-term investments

112,986

148,697

Accounts receivable, net of allowances of $30.2 million and $32.2 million, respectively

240,150

244,416

Inventories

121,290

125,813

Income taxes receivable

13,958

4,565

Assets held for sale

3,143

4,200

Other current assets

47,814

41,799

Total current assets

720,283

739,835

Property and equipment, net

79,495

98,762

Restricted cash equivalents

39,809

32,531

Goodwill

394,372

403,278

Intangible assets, net

86,246

123,008

Deferred tax assets

43,265

45,083

Other assets

34,369

15,504

Total assets

$

1,397,839

$

1,458,001

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

118,703

$

123,935

Accrued and other liabilities

74,797

98,090

Deferred revenue

65,181

55,833

Convertible senior notes, net – current

330,367

—

Income taxes payable

6,762

5,309

Total current liabilities

595,810

283,167

Convertible senior notes, net – non-current

—

318,957

Imputed financing obligation related to build-to-suit lease

—

13,944

Noncurrent contingent and other liabilities

17,307

28,801

Deferred tax liabilities

6,151

11,652

Noncurrent income taxes payable

18,305

20,169

Total liabilities

637,573

676,690

Total stockholders’ equity

760,266

781,311

Total liabilities and stockholders’ equity

$

1,397,839

$

1,458,001

5

Electronics For Imaging, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Nine Months Ended September 30,

2018

2017

Cash flows from operating activities:

Net income

$

2,093

$

11,000

Adjustments to reconcile net income to net cash provided by operating activities:

Cash, cash equivalents, and restricted cash equivalents at end of period*

$

220,751

$

182,656

*Restricted Cash. ASU 2016-18, Statement of Cash Flows: Restricted Cash, which we adopted in Q1 2018, requires that the statement of cash flows explain the change in cash, cash equivalents, and restricted cash equivalents. Therefore, restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown above. This presentation is required to be presented retrospectively to prior periods.

6

Electronics For Imaging, Inc.

Revenue by Operating Segment and Geographic Area

(in thousands)

(unaudited)

Three Months EndedSeptember 30,

Nine Months Ended September 30,

2018

2017

2018

2017

Revenue by Operating Segment

Industrial Inkjet

$

154,902

$

142,930

$

453,545

$

407,886

Productivity Software

40,452

37,171

125,839

111,292

Fiery

61,780

68,258

178,688

204,919

Total

$

257,134

$

248,359

$

758,072

$

724,097

Revenue by Geographic Area

Americas

$

134,491

$

129,488

$

374,170

$

353,397

EMEA

88,879

85,089

271,064

274,635

APAC

33,764

33,782

112,838

96,065

Total

$

257,134

$

248,359

$

758,072

$

724,097

Revenue Ex-Currency Adjustment

$

901

$

—

$

(15,867

)

$

—

Total

$

258,035

$

248,359

$

742,205

$

724,097

7

About our Non-GAAP Net Income and Adjustments

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial results prepared in accordance with GAAP, we use non-GAAP measures of net income and earnings per diluted share that are GAAP net income and GAAP earnings per diluted share adjusted to exclude certain costs, expenses, gains, and losses.

We believe that the presentation of non-GAAP net income, non-GAAP operating income, and non-GAAP earnings per diluted share provides important supplemental information regarding certain costs, expenses, gains, and significant items that we believe are important to understanding financial and business trends relating to our financial condition and results of operations. Non-GAAP net income, non-GAAP operating income, and non-GAAP earnings per diluted share are among the primary indicators used by management as a basis for planning and forecasting future periods and by management and our Board of Directors to determine whether our operating performance has met specified targets and thresholds. Management uses non-GAAP net income, non-GAAP operating income, and non-GAAP earnings per diluted share when evaluating operating performance because it believes the exclusion of the items described below, for which the amounts and/or timing may vary significantly depending on our activities and other factors, facilitates comparability of our operating performance from period to period. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management does and use this information in their assessment of our business and the valuation of our Company.

Use and Economic Substance of Non-GAAP Financial Measures

We compute non-GAAP net income, non-GAAP operating income, and non-GAAP earnings per diluted share by adjusting GAAP net income, non-GAAP operating income, and GAAP earnings per diluted share to remove the impact of amortization of intangible assets, stock-based compensation expense, restructuring and other expenses, acquisition-related transaction costs, costs to integrate such acquisitions into our business, incremental cost of revenue due to the fair value adjustment to inventories acquired in business acquisitions, changes in the fair value of contingent consideration including the related foreign exchange fluctuation impact, revenue recognition and accounting review costs, litigation settlements and non-cash interest expense related to our 0.75% convertible senior notes (“Notes”). We use a constant non-GAAP tax rate of 19%, which we believe reflects the long-term average tax rate based on our international structure and geographic distribution of revenue and profit.

Ex-Currency. To better understand trends in our business, we believe it is helpful to adjust our statement of operations to exclude the impact of year-over-year changes in the translation of foreign currencies into U.S. dollars. This is a non-GAAP measure that is calculated by adjusting revenue, gross profit, and operating expenses by using historical exchange rates in effect during the comparable prior year period and removing the balance sheet currency re-measurement impact from interest income and other income, net of expenses, including removal of any hedging gains and losses. We refer to these adjustments as “ex-currency”. Management believes the ex-currency measures provide investors with an additional perspective on year-over-year financial trends and enables investors to analyze our operating results in the same way management does. The year-over-year currency impact can be determined as the difference between year-over-year actual growth rates and year-over-year ex-currency growth rates.

These excluded items are described below:

◦

Cost of revenue related to fair value adjustment of the Free Flow Print Server business (“FFPS”). Inventory acquired in an acquisition must be recorded at fair value rather than historical cost in accordance with ASC 805, Business Combinations. The fair value of FFPS inventory reflects the manufacturing cost plus a portion of the expected gross profit. In 2017, we adjusted our cost of revenue to reflect the expected gross profit that was included in the inventory valuation under ASC 805. We believe this adjustment is useful to investors to understand the gross profit trends of our ongoing business.

◦

Amortization of intangible assets. Intangible assets acquired to date are being amortized on a straight-line basis.

Restructuring charges incurred as we consolidate the number and size of our facilities and reduce the size of our workforce.

•

Integration-related expenseswere $0.9 and $3.2 millionfor the three and nine months ended September 30, 2018, respectively, and $0.2 and $1.0 millionfor the three and nine months ended September 30, 2017, respectively. We have acquired 18 businesses in the last 5 years, which have required significant information technology investment to integrate them into our business.

◦

Acquisition-related transaction costs associated with businesses acquired during the periods reported and anticipated transactions of $0.2 and $0.9 millionfor the three and nine months ended September 30, 2018, respectively, and $0.6 and $1.8 millionfor the three and nine months ended September 30, 2017, respectively.

◦

Changes in fair value of contingent consideration. Our management determined that we should analyze the total return provided by the investment when evaluating operating results of an acquired entity. The total return consists of operating profit generated from the acquired entity compared to the purchase price paid, including the final amounts paid for contingent consideration without considering any post-acquisition adjustments related to changes in the fair value of the contingent consideration. Because our management believes the final purchase price paid for the acquisition reflects the accounting value assigned to both contingent consideration and to the intangible assets, we exclude the GAAP impact of any adjustments to the fair value of acquisition-related contingent consideration from the operating results of an acquisition in subsequent periods, including the related foreign exchange fluctuation impact. We believe this approach is useful in understanding the long-term return provided by our acquisitions and that investors benefit from a supplemental non-GAAP financial measure that excludes the impact of this adjustment.

◦

Non-cash interest expense on our Notes. Our Notes may be settled in cash on conversion. We are required to separately account for the liability (debt) and equity (conversion option) components of the Notes in a manner that reflects our non-convertible debt borrowing rate. Accordingly, for GAAP purposes, we are required to amortize a debt discount equal to the fair value of the conversion option as interest expense on our $345 million of 0.75% convertible senior notes that were issued in a private placement in September 2014 over the term of the Notes.

◦

Revenue recognition accounting review costs and litigation and other settlements. As described in “Item 9A, Controls and Procedures” of our annual report on Form 10-K, for the year ended December 31, 2017, as amended, our management concluded that we had material weaknesses in our internal control over financial reporting as of December 31, 2017 related to revenue recognition practices and the valuation of certain textile digital inkjet printer inventories. Therefore, we did not maintain effective internal control over financial reporting or effective disclosure controls and procedures, both of which are requirements of the Securities Exchange Act of 1934, as of that date. The review of our revenue recognition practices has required that we expend significant management time and incur significant accounting, legal, and other expenses (credits) of $(0.1) and $1.7 millionduring the three and nine months ended September 30, 2018, respectively. We expect to incur additional costs in future periods.

◦

Tax effect of non-GAAP adjustments. We use a constant non-GAAP tax rate of 19%, which we believe reflects the long-term average tax rate based on our international structure and geographic distribution of revenue and profit. The long-term average tax rate is calculated in accordance with the principles of ASC 740, Income Taxes, to estimate the non-GAAP income tax provision in each jurisdiction in which we operate after excluding the tax effect of the non-GAAP items described above, and $(0.7), $1.2 and $27.5 million of tax charges (benefits) recognized in Q3 18, Q1 18, and Q4 17, respectively, as a result of the 2017 Tax Act, which was enacted on December 22, 2017.